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TitleAnnual report of the Secretary of the Treasury on the state of the finances for the year
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1 redS




• Al

Annual Report .%7.

of the

Secretary of the Treasury

on the

State of the Finances

For the Fiscal Year Ended June 30, 1967

Page 2





For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402 - Price ?2.75 (paper cover)

Page 412


of February 23, 1965, constituted the requisite two-thirds majority for approval.
By August 31 an additional 32 members had submitted their ratification, and
Fund resources had been increased from $16 billion to $20.6 billion, or close to
the ultimate $21 billion target for the Fund's entire 104 nation membership. The
quota increases must be paid to the Fund parti}- in a member's own currency and
partly in gold. Such gold payments, however, have entailed gold losses for the two
key ciUTency countries, the United States and the United Kingdom, as other
members have converted dollars and sterling into gold for payment of their
gold subscription. In order to compensate for these losses, the quota increase
arrangement provides that the Fund will deposit a total of up to $350 million of
gold with the Federal Reserve Bank of New York and the Bank of England.
Insofar as the United States is concerned, these compensating operations began in
September 1965, and as of August 31, 1966, the Federal Reserve Bank of New
York held for U.S. Treasury account $202.7 million of gold so deposited by the
IMF. The gold is reflected in the Federal Reserve's statement of condition under
"other assets" and the deposit liability under "other deposits."

Gold market developments

The price of gold in the London market has ranged between $35.11 and $35.1940
during the first 8 months of this year, with upward pressures on the price pre-
dominating during much of the period. The underlying supply/demand relation-
ship in the market has been quite different this year, however, from the same
period a year ago when similar price pressures prevailed. Private demand for
gold this year has remained well below last year's levels, no doubt reflecting in
part the much more attractive interest yields this year as a result of tightening
credit conditions in many countries. On the other hand, the supply of gold coming
on the market has also been considerably reduced from last year, primarily
because of the shift in South Africa's balance-of-payments position. Whereas
during the first 7 months of 1965 South African gold reserves decHned by $213
million, adding roughly that much to the suppUes available from new production
for sale in London, diu'ing the same period this year South African gold reserves
increased by $250 million, with consequent reduction of the amount of new
production available for sale. As a result of this swing in South Africa's payments
position and reserves, therefore, there has been a temporary decline of about
$500 million in gold coming on the London market from this source. Moreover,
there were no Russian sales of gold during the first 8 months of this year. Over
coming months there is a reasonable likelihood that the flow of gold to the London
market will return to more normal levels.

U.S. Treasury securities denoviinated in foreign currencies, 1966

[In millions of dollai's equivalent]

Issued to-

Page 413


U.S. net monetary gold transactions with foreign countries and international insti-
tutions ' January-June 1966

[In millions of dollars at $35 per fine troy ounce; U.S. net sales (—), net purchases (+)]

Country First Second
quarter quarter

Canada - +100.0 +50.0
Colombia +7.0
France —102.8 —220.7
Lebanon —10.8
Switzerland +7.0 +11.0
United Kingdom- -19.0 —7.2
All other -15.6 -.4

Net sales -34.0 -167.3

• Not reflected in this table are U.S. monetary gold transactions with foreign countries mitigated through
special deposits by the IMF.

Exhibit 59.—Treasury and Federal Reserve foreign exchange operations,
September 1966-March 1967

This tenth joint interim report reflects the Treasury-Federal Reserve policy of
inaking available additional information on foreign exchange operations from time
to time.^

This report was prepared by Charles A. Coombs, Vice President in charge of the
Foreign Department of the Federal Reserve Bank of New York, and Special Manager,
System Open Market Account.

During the period September 1966 through early March 1967, all outstanding
drawings on the Federal Reserve swap network—both by foreign central banks
and by the Federal Reserve—were repaid and the $4.5 billion of credit lines
available under the network have thus been restored to a fully available standby
basis (see table I). Federal Reserve drawings of $235 million outstanding as of
the end of August 1966 were fully liquidated, while subsequent Federal Reserve
drawings of $100 million on the Bank of Italy and $140 million on the German
Federal Bank were also repaid by early 1967.
By early March 1967, the Bank of England had completely liquidated its

swap drawings on the Federal Reserve, which had reached a peak of $450 million
last July, while also fully repaying further special credits in sizable amount
received during the height of the sterling crisis from both the Federal Reserve
and the U.S. Treasury. Drawings on the Federal Reserve of $233 million by the
Bank for International Settlements (BIS) and a small amount by another
central bank during the period have also been paid off.

Since the inception of the Federal Reserve swap network nearly 5 years ago,
total drawings on the network have amounted to $7.7 billion, of which 91.3 per-
cent was repaid within 6 months and 98.5 percent within 9 months, while no
drawing has been outstanding for so long as a year. Nor has there been any
instance of unduly protracted use of other comparable central bank credit arrange-
ments. The assurance of such integrity in the use of central bank credit facilities
has been the foundation on which the Federal Reserve swap network and related
credit arrangements have been built up into a solid defense line against international
currency speculation.

' See also exhibit 58.

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Social security recommendations, fiscal 1967 33
State, local, and territorial governments:

Customs collections and payments by regions and districts 498-9
Federal aid by States and programs 696-727
Government security holdings 647-9
Internal revenue collections and refunds by States 496-7
National banks and banking offices by States 63
Proposed financial transactions with Federal Government 244-7,

267-9, 270-3
Sales of Series E and H savings bonds by States 639
Unemployment trust fund, balances by States 693-4

Surplus, or deficit, U.S. Government:
1789-1967 441,443,445,447

Tax and loan accounts, Treasury balances 650, 651


Aged, tax treatment of 32-3, 299-302, 310-11
Developments 1967 28-39, 279-313
Employment taxes 490, 496
Estate and gift taxes 5, 490, 496
Excise taxes:

1967 recommendations and legislation 33-4
Interest equalization tax 38, 40-1, 394-6
Receipts and refunds 5, 491-4
User charges 33-4

Foreign Investors Tax Act 35-6, 37-8
Income and profits taxes:

1967-68 recommendations and legislation 31, 35-6, 37-8
Corporation 5, 490, 496
Individual 5, 490, 496
Surcharge recommendations XXI-XXII, 31, 212

International tax matters 37-9, 108-09, 304-07
Investment credit and accelerated depreciation XX-XXI, 29-31, 279-91
Pension Plans, Committee on 416
Policy XX-XXII, 307-13

Treasurer of the United States:
Account of the 9-10, 93-4, 439, 565, 650-1
Office of the, administrative report 92-8
Securities held in custody 98

Treasury, Department of the:
Circulars, Department. See Circulars, Department.
Consultative Committee of the Business Council 417
Employees, number, quarterly, June 30, 1966 to 1967 784
Foreign loan reporting requirement 52-3
Management improvement program. See Management improvement.
Officials, administrative and staff, December 31, 1967 XII-XIV
Organization and procedure orders 400-09
Organization chart XV
Secretaries, Under Secretaries, General Counsels, Assistant Secretaries,

Special Assistants to the Secretary (for Enforcement), and Deputy
Under Secretaries for Monetary Affairs, January 20, 1965-December
31, 1967 XI

Security program 60, 148, 407-09
Trust and other accounts (see also Specific funds)


Government agency securities, market transactions (net) 479, 487
Interfund transactions 464, 466, 470, 478, 479
Investments in public debt and agency securities 467, 659-61
Participation certificate purchases 468
Receipts and expenditures 6-7, 438, 462-6, 478-80, 485-7
Refunds of receipts and transfers to 444, 446, 448-9, 450

Trust enterprise revolving funds:
Government agency securities, market transactions (net) 468, 487
Receipts and expenditures 474

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U.S. balance of payments. See Balance of payments.
U.S. Coast Guard: Page

Administrative report 126-41
Advisory committees 426-32
Treasury orders concerning 401-02, 403-05

U.S. Government corporations. See Corporations and other business-tyj^e
activities of tlie U.S. Government.

U.S. savings bonds. See Bonds, U.S. Government: Savings.
U.S. Savings Bonds Division, administrative report 141-4
U.S. savings notes. See Notes, U.S. Government: Savings.
U.S. Secret Service, administrative report 144-9
Under Secretary of the Treasury Barr:
Remarks and statements on:

Financial management of Federal credit programs:
October 6, 1966 260-5

Financing a college education:
February 4, 1967 265-9
June 18, 1967 269-73

International financial and monetary affairs:
August 16, 1966 343-4
April 20, 1967 344-9

Under Secretary of the Treasury for Monetary Affairs Deming:
Remarks on:

International monetary affairs:
July 14, 1966 350-3
October 31, 1966 353-60
Decembers, 1966 360-4

Unemployment trust fund 449, 470, 659, 688-94

Veterans' Administration:

Investments 660
National service life insurance fund 660, 680-1
Reopened insurance fund 660
Special term insurance fund 660
U.S. Government life insurance fund 660, 695

World Bank:

Annual review 46-9, 323
Convention on the Settlement of Investment Disputes 47
Financial transactions 46-7
International Development Association (IDA), affiliate of 46, 47
International Finance Corporation (IFC), affiliate of 46
Inter-American Development Bank. See Inter- American Development



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